Estimating Your Home's Value

The Appraisal: Estimating Your Home’s Value

Early in the process of a Home Equity Conversion Mortgage or HECM reverse mortgage, your lender will obtain an appraisal of your home to estimate its value. The appraisal is necessary because it helps your lender determine whether you’re eligible for a reverse mortgage as well as the loan amount you’ll qualify to receive. In addition, the appraisal also can affect whether you’ll need to provide additional funds when the loan closes.

What happens during an appraisal?

Your lender will hire an appraiser who is certified by the FederalHousing Administration (FHA). An appraisal generally includes three steps: market research, inspection and analysis.

Market research about the neighborhood and your home. The appraiser will:

Review property tax records to find the square footage and type of home you have.

View satellite photos of your home and neighborhood.

Identify other homes that have sold recently within a close radius of your home. The homes will match yours in size and type. These homes are called “comparables” and will provide a basis of comparison with your home.

Inspection of your home. The appraiser will:

Inspect your home for:

Quality and condition;

Square footage and layout; and

Number of bedrooms and bathrooms.

Take photos in and around your home to document it.

Analysis of your home inspection and the market research. The appraiser will:

Take photographs of the comparable homes.

Research the comparable homes to find the ones that are most like yours.

Consider differences between your home and the comparable homes, such as square footage or extra bathrooms.

Review the sales prices for the comparable homes to determine your home’s value.

In addition to these three steps, the appraiser also will make sure your home meets FHA’s guidelines for health and safety, property type, construction, zoning and condition.

Why aren’t our renovations included in the appraised value?

You may have spent considerable money on renovations in a kitchen, bathroom or other area of your home. Those improvements may add to the appraisal, but they probably won’t transfer dollar-for-dollar to your home’s value. Variations in the housing market also will affect your home’s value, and that can affect the value of renovations as well. Typically, kitchen renovations have the most return on investment, but again, the money spent on a renovation may not be returned in full with the appraised value.

Your loan officer can give you more information about the appraisal process and how your home’s value affects your eligibility and possible loan amount. If you have questions about your home’s appraisal, ask your loan officer for details.

Can I find out the value of my home without an appraisal?

An appraisal is the best estimate of your home’s value and is required for the HECM loan. If you want to obtain other estimates on your own,you could:

Call your county assessor to find out the tax-assessed value of your home. Keep in mind, however, that the tax assessment likely will be lower than appraised value because it isn’t the market value or possible selling price for your home.

Talk with your insurance agent about the replacement value of your home. This estimate may be much higher than the appraised value because it represents replacement for property loss rather than market value.

Visit a website such as Zillow or Trulia to see real estate listings in your neighborhood and get an estimate of your home’s value. While these websites may provide a general idea about your home’s value, these estimates might not be accurate. In addition, the other homes you find listed in your area might not be comparable to yours.

Contact a Realtor to find out a potential sales price for your home. The Realtor can look at comparable homes to determine a selling price. If you go this route, bear in mind that the Realtor is a professional who has an interest in selling your home. If you aren’t genuinely interested in selling, talking with a Realtor could open the door to follow-up sales calls you don’t want.